International Travel and Expense Implementation


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In a global business service model, travel and expense services typically fit in a transactional center, which can serve the global population. Many challenges exist with international travel and expense due to the complexities that come with a global process including policy standardization, regulatory and data protection compliance, system choices, and design options, among others. ScottMadden provides best practices for planning and preparation, requirements and design, and training and audit when implementing a global travel and expense program. This report discusses ScottMadden's best practices for implementing international travel and expense administration.

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International Travel and Expense Implementation

  1. 1. Copyright © 2013 by ScottMadden. All rights reserved. International Travel and Expense Implementation Best Practices June 2013 Contact:
  2. 2. Copyright © 2013 by ScottMadden. All rights reserved. Introduction  Thinking about expanding the use of your travel and expense (T&E) system globally?  Considering how to choose a system and vendor? Debating how you can get more from your current system and your audit group?  Many challenges exist on the topic of international T&E due to the complexities that come with a global process  ScottMadden recommends several best practices in planning and preparation, requirements and design, and training and audit when implementing a global T&E program 1 • Complex tax and reporting requirements • Foreign language requirements • Policy standardization • Regulatory and data protection compliance • Multitude of system choices and design options • Dispersed audit resources
  3. 3. Copyright © 2013 by ScottMadden. All rights reserved. Global Business Service Models In a global business service model, T&E typically fits in a transactional center, which can serve the global population. 2 Regional – Analytical  Accounting close  Settlement  Risk management  Budgeting  Business case  Reporting  SOX  Internal audit  Pricing Global – Transactional  Accounts payable  Travel and expense  Accounts receivable  Billing  Payroll  Fixed assets Regional – Analytical Regional – Analytical Customer facing hub Varies: COEs  Rebates and inventory accounting  Competitive intelligence  Risk management  Deal review  Mergers and acquisition  Workforce management  Tech pool management  Financial systems Regional – Analytical Regional – Analytical
  4. 4. Copyright © 2013 by ScottMadden. All rights reserved. Planning and Preparation Get started early with data protection reviews with your legal team, especially if implementing in Europe  Data privacy and protection is a hot topic for global companies and is marked by significant differences between the United States and Europe in their approach  Significant lead time should be added to the implementation timeline in each country for: — Internal legal reviews — Interaction with local in-country legal counsel — Workers’ Council review cycles — Required communications to international employees about use of data  For Europe, the “Safe Harbor” framework is in place for U.S. organizations to follow to ensure adequate data protection per the European Commission — Many systems are “Safe Harbor” compliant. Perform the due diligence with your vendor, legal, and corporate IT to ensure this is the case  While data privacy standards are most stringent in Europe, countries in Asia and South America are becoming more aware and imposing some regulations — Japan, S. Korea, Mexico, and Brazil all have stipulations for protection in data transfer Ensure that there is harmonization of T&E policies at the global, regional, and country level prior to system implementation  Country and cultural difference can impact design and implementation requirements. Understand what these are and what should be allowed as a standard in each country  Meal limits, entertainment standards, and travel allowances vary by country. Know what is required and what will be allowed for reimbursement prior to implementing a T&E system  Policy harmonization can take several weeks to accomplish—many stakeholders must be consulted to implement standard policies effectively 3 Global Regional Country Harmonized T&E Policy
  5. 5. Copyright © 2013 by ScottMadden. All rights reserved. Requirements and Design Establish a portfolio of design principles and solutions (which can be re-used across countries)  At first glance, the varying requirements of T&E in regards to tax, deductions, limits, and reporting can be daunting and seem unique by country  However, design decisions can be made from a portfolio of design principles that meet the various requirements but also streamline configuration, testing, and the user experience. Be creative and test solutions to see how the financial postings behave  For example: — In Sweden, the tax rate on food varies depending upon whether the meal was eat-in or carry-out — In France, users must select the appropriate tax rate for certain expenses and apply different rates to fractions of the total expense (e.g., one rate applies to food and another rate applies to service) — The same design in the form used for the expense type can be used for both situations Use a T&E system that can be flexible in design and has preconfigured modules for international per diems, travel allowances, and tax configurations  Systems are available that come with modules to easily set up your travel policy with international per diems, tax, and travel allowances — Various rate sources are available who set their rates against market conditions and benchmarks. Software application vendors should initiate updates to the rates routinely and notify you that the rates will be changing — Be clear on internal requirements and discuss options for use with the vendor before committing to a system design 4 Expense Type Mapping Country Tax Authority State/Province Tax Name Rate Type Calculation Method Tax Rate Effective Date End Date CANADA CA-GST Alberta GST Standard Percentage 5.0% 1/1/2012 12/31/2014 British Columbia Manitoba Northwest Territories Nunavut Ontario Prince Edward Island Quebec Saskatchewan Yukon Territory CA-HST New Brunswick HST Standard Percentage 13.0% 1/1/2012 12/31/2014 Newfoundland Nova Scotia CA-PST5 Saskatchewan PST5 Standard Percentage 5.0% 1/1/2012 12/31/2014 Yukon Territory CA-PST7 British Columbia PST7 Standard Percentage 7.0% 1/1/2012 12/31/2014 Manitoba CA-QST Quebec QST Standard Percentage 7.5% 1/1/2012 12/31/2014 CA-PSTON Ontario PST8 Standard Percentage 8.0% 1/1/2012 12/31/2014 CA-PSTPE Prince Edward Island PSTPE Standard Percentage 10.0% 1/1/2012 12/31/2014 UNITED KINGDOM UK UK Standard Percentage 15.0% 1/1/2011 12/31/2012 Reduced Percentage 5.0% 1/1/2011 12/31/2012 Zero Percentage 0.0% 1/1/2011 12/31/2012
  6. 6. Copyright © 2013 by ScottMadden. All rights reserved. Requirements and Design (Cont’d) Do internal analysis on country regulations and requirements  Use data from historical financial postings to prove design concepts — Look back at T&E postings from the past year to gain insight on how expense and tax amounts need to be posted — Test assumptions and findings with project team and leverage design portfolio  Gain local leadership and subject matter expert approval on outputs — Ensure that local reporting requirements are met  As you test the various design concepts, ask an in-country finance representative to validate the results. Involve in- country representatives and project team members in the user-acceptance testing phase Use a stable implementation team who can share insight on design and configuration for various country requirements  Build the functional and technical knowledge within the team as the vendor cannot always provide the design and integration support needed for complex solutions  Use a cross-functional team with representatives from HRIS, IT, finance, and corporate travel. Test the system with frequent T&E submitters to validate the functionality  Be thoughtful, creative, and test the design and configuration thoroughly. Use solutions that were successful in other countries to expand the use of the design portfolio 5 Gather Requirements Conduct Analysis Propose Design Test Design Approve Design
  7. 7. Copyright © 2013 by ScottMadden. All rights reserved. Training and Audit Understand requirements for language translation, and translate both system and collateral communication and training materials where required  There are both regulatory and cultural reasons for translating a system into the local language — In countries like France and Germany, local language translation may be required by the Workers’ Councils. In places like Japan, it may not be common for employees to read and write in English; therefore, Japanese translation is required — Ask for advice on translation from international HR representatives and legal counsel  Some applications, like Concur, offer in-system language translation that can be easily applied to an existing configuration. Custom fields can be translated with assistance from representatives in country to ensure fluency and accuracy Centralize your T&E audit function for efficiency in audit and consistency in policy interpretation  Once T&E policies are harmonized, efficiencies and cost savings can be gained by centralizing T&E audit in one location — Using one group to administer T&E policy ensures consistency across the organization. Reporting centrally will provide consistency in audit, allowances, and exceptions that can be difficult to achieve in a decentralized model — Cycle times for review and approval of T&E do not require 24-hour employee support and can be managed with e-communication, documented approval and processing schedules, and a clear escalation procedure — A global company might leverage additional locations or processors to optimize parts of the financial process  Hire T&E auditors with foreign language proficiency to ensure accuracy and provide support in reviewing expense reports from international locations — Many U.S. cities offer a diverse workforce with many language capabilities — Vendors exist who can offer support for foreign languages that are not frequently used in the organization 6 Category Category [Japanese] Expense Type Exp Type [Japanese] 02 - Meals and Entertainment 食事・ 接待交際費 Per Diem 国内出張: 食事日当 ガ ソ リ ン 代03 - Transportation 交通費 Gas / Petrol 空港使用料 03 - Transportation 交通費 Car Rental レ ン タ カ ー 03 - Transportation 交通費 Airport Tax 航空運賃 02 - Meals and Entertainment 食事・ 接待交際費 Special Events 全社イ ベン ト 03 - Transportation 交通費 Airfare
  8. 8. Copyright © 2013 by ScottMadden. All rights reserved. Training and Audit (Cont’d) Train on site and in person; the importance of change management through face-to-face interaction during go- live and training should not be minimized  Pair the go-live period with an on-site training program to increase adoption and reduce go-live errors and issues — Trouble-shooting errors can happen quickly while on site locally to provide a smoother launch experience — Identify local “super users” who are trained early on the process and can act as contacts locally post-launch — Follow-up and Q&A sessions can be offered remotely; but these are often more effective once the relationship is established face to face  A standard portfolio of communication and training materials should be developed and used across all T&E system users; however, customization and modifications can be completed where required. For example: — Translation into local language when required on advice from local HR or legal counsel — Special instructions for assistants and approvers — Customized reference guides for different country requirements — Training webinar sessions delivered in local language with the assistance of a local “super user” 7 airfare 航空運賃 pasaje aéreo passagem aérea flygresor billet d'avion flugpreis
  9. 9. Copyright © 2013 by ScottMadden. All rights reserved. Contact Us To learn more about our approach to implementing the best practices for international T&E, please contact us. 8 ScottMadden, Inc. 3495 Piedmont Rd, Bldg 10 Suite 805 Atlanta, GA 30305 Phone: 404-814-0020 Jerred Crosby Partner Molly Donofrio Director ScottMadden, Inc. 2626 Glenwood Ave Suite 480 Raleigh, NC 27608 Phone: 919-781-4191